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A new employment support scheme will see the Treasury increase the wages of people in “viable” jobs who work at least a third of their normal hours..
Chancellor Rishi Sunak said the initiative, which replaces the licensing scheme, will be in effect for six months starting in November.
He told the House of Commons that it is “fundamentally wrong” to keep people in jobs that only exist within the licensing system.
The new employment support scheme will make the UK government and employers pay up to two-thirds of the wages of people who work.
The Treasury will provide similar support for the self-employed, added the Chancellor.
He also announced that the VAT cut to 5% for tourism and hospitality companies will be extended until the end of March next year in targeted support to the sectors.
In addition, a new “pay-as-you-grow” scheme will allow companies that have obtained emergency loans from the government to “recover” from the coronavirus to repay them over a period of up to 10 years.
For the new employment support scheme, the government grant level will be calculated based on the worker’s usual salary, but will be capped at £ 697.92 per month.
People who work at least a third of their usual hours will be paid for that job as normal.
Then the state and employers will increase those wages to cover two-thirds of the wages they have lost from working reduced hours, meaning they would receive at least 77% of their usual wage.
The government will cover 22%, or up to £ 697.92 a month, and the employer will have to pay the remaining 55% (including the third they have already covered).
The plan will cost the Treasury approximately £ 300 million a month for every 1 million workers who adopt the plan.
Sunak said it would allow companies to keep employees on a job on shorter hours.
It will apply to small and medium-sized companies, but larger companies will only be eligible if they have experienced a drop in turnover during the crisis.
Companies will not be able to issue layoff notices to employees while participating in the employment support program and there will be restrictions on the distribution of capital to shareholders.
Sunak told MPs: “The government will directly support the wages of working people, giving companies facing depressed demand the option of keeping employees in a job for shorter hours rather than firing them.”
The Chancellor said that this latest economic intervention is based on “three principles.”
Sunak continued: “First, it will support viable jobs. To ensure that employees must work at least one-third of their normal hours and that their employer pays them for that work normally.
“The government, together with the employers, will increase the wages of these people by covering two-thirds of the wages they have lost by reducing their working hours, and the employee will keep his job.
“Second, we will direct support to the companies that need it most. All small and medium-sized companies are eligible, but larger companies are only eligible when their turnover has dropped through the crisis.
“Third, it will be open to employers across the UK, even if they haven’t used the licensing scheme before.
“The plan will run for six months starting in November and employers who retain licensed staff for shorter hours can claim both the employment support plan and the job retention bonus.”
Sunak also announced the extension of the subsidy scheme for the self-employed.
An initial taxable grant will be provided to those who are currently eligible for the grant and continue to actively trade but face reduced demand due to the coronavirus.
A lump sum will cover three-month earnings for the period from November to the end of January next year, worth 20% of average monthly earnings, compared to 80% previously, up to a total of £ 1,875.
A second additional grant, which will be kept under review, could be available to the self-employed to cover the period from February to April.
Explaining the need to replace the license, the Chancellor said that “we cannot save all the businesses” and “we cannot save all the jobs.”
He continued: “Our economy is now likely to experience a more permanent adjustment.
“The sources of our economic growth and the types of jobs we create will adapt and evolve to the new normal, and our plan must adapt and evolve in response.
“Above all, we must face the trade-offs and tough decisions that the coronavirus presents and there has been no harder choice than to end the licensing scheme.
“Licensing was the right policy at the time we introduced it – it provided immediate short-term protection for millions of jobs during a period of acute crisis.
“But as the economy reopens, it is fundamentally wrong to keep people in jobs that only exist on permit.”
